Murdoch's mission （1） By Aline van Duyn and Joshua Chaffin
Friday, August 03, 2007
Four days after Rupert Murdoch made front-page news around the world through his bid to buy Dow Jones and its Wall Street Journal newspaper, the mogul was standing before 60 of his most senior executives.
The meeting in early May at a plush Californian resort, not far from his own ranch near Carmel, was called to discuss opportunities for news businesses – from print to television – in an age of increasing digital distribution of content.
Mr Murdoch opened the session by asking his troops to raise their hand if they knew how news would work in an age dominated by the internet. None shot up. Mr Murdoch's next instruction was: let's find some answers.
The 76-year-old founder of News Corp – the global media group worth some $68bn (£33bn, �0bn) that he built up from the small Australian newspaper company he inherited over 50 years ago – has just doubled his bet that he can figure out how to make money from traditional media in a digital age.
In a departure from his previous strategy of adding digital expertise through acquisitions such as MySpace, the social networking site he took over in 2005 for $580m and which has become one of the world's most popular web destinations, he is instead paying nine times as much to buy one of the biggest companies in the slow-growing US newspaper sector.
The $5bn move is a counter- intuitive investment in an industry on which many investors have given up. Recent auctions of other American dailies have drawn few bidders and trading statistics have been grim. In May, compared with a year earlier, advertising revenue for US newspaper companies fell by more than 9 per cent – the worst month ever in a non-recession period. Classified advertising – from jobs to property – is shifting to the internet at a faster pace than ever, while profit margins are being squeezed because so many costs – such as paper and printing presses – are fixed.
“Any significant investment in newspapers requires intestinal fortitude at this point,” says Peter Aman, an Atlanta-based partner at Bain, the consultancy, who works with many of the large companies in the sector.
News Corp was built on newspapers, first in Australia and then in the UK and the US, but these now form a small part of a group that includes not only MySpace but 20th Century Fox studios, the biggest group of US television stations, satellite broadcasters in the UK and Italy, and book publishing. Still, the newspaper division gives Mr Murdoch enormous visibility and provides political clout (see below). Newspapers also mean a lot to Mr Murdoch personally: in one of his letters to the Bancroft family, which has owned Dow Jones for over a century and yesterday agreed to sell to him after three months of agonising, Mr Murdoch said: “First and foremost, I am a newspaper man.”
Yet the purchase of Dow Jones is less of a bet on newspapers than a move by Mr Murdoch to acquire content that he can then use across the many different media sectors in which he plays: print, television and, increasingly, the internet.
The financial news and information that Dow Jones produces is regarded as more valuable than the general news on which many newspapers survive, both in its importance to trading and business decisions and in the appeal to advertisers of its readers, who are generally well- educated and wealthy.
“Not every newspaper is the same,” says Mr Aman. “Some business-focused ones are likely to have more robust opportunities in the future. National newspapers could too, because their scale will make them more attractive to advertisers.”
The Wall Street Journal is one of the few US newspapers that is both business-focused and read across the country. Its closest national rivals are USA Today and The New York Times.
Despite Mr Murdoch's long newspaper history, buying Dow Jones takes him for the first time into the financial information business. Overall, demand for such information is expected to grow, fuelled by the growth of financial assets themselves. In one estimate, the McKinsey Global Institute says financial assets worldwide will be worth $214,000bn by 2010, up from $140,000bn in 2005.
To manage these assets, the need for accurate, fast and in-depth financial information will grow around the world, especially in Asia – and, although individuals are used to getting information for free on the web, businesses do pay for information. Many continue to do so, especially when gaining access to information faster, or being able to analyse market trends better, gives users an edge over rivals and makes them money.
In spite of the overall growth in demand, consolidation in financial services, as well as the growing competitive pressure as more information becomes freely available on the internet, is prompting tie-ups across the information industries. Just days after Mr Murdoch confirmed he had bid for Dow Jones, Reuters and Thomson announced a $17bn merger, aimed at dominating the market for electronically distributed information. (Canada's Thomson sold all its newspaper assets years ago, one of the earliest responses to the threat posed by declines in circulation. Indeed, in London Mr Murdoch bought The Times from Thomson in 1981.)
“The common thread for media companies is that technology and the internet are blurring distribution lines, such as between newspapers, electronic distribution and video,” says Devin Wenig, who is due to head Reuters' and Thomson's merged news and financial side. “The different businesses are no longer as neatly segmented, which means it is more about a brand and what you can do with a brand.
“In the case of The Wall Street Journal, this would mean considering what you can do with its information in print as well as on the internet, as a television channel – it is something that could be used across the overall breadth of News Corp.”
[用户系统信息]Mozilla/4.0 (compatible; MSIE 6.0; Windows NT 5.1; SV1)
